Declining to follow the majority view that parties can waive their right to a judicial forum for claims under the Credit Repair Organizations Act (CROA), a federal district court in California has held that the CROA contains an non-waivable "right to sue" that prohibits the election of an alternative forum for resolution of CROA claims.
In Greenwood v. Compucredit Corp., No. C 08-04878 CW, 2009 WL 902323 (N.D. Cal. Apr. 1, 2009), Greenwood and other consumers applied for credit card accounts with Compucredit. As part of the application, the consumers consented to certain fees associated with the account and agreed to arbitrate any dispute arising out of or related to the credit contract.
A dispute arose and the consumers sued Compucredit for violations of state and federal law, including the CROA. The consumers also sought class certification on a national basis for their CROA claims. Compucredit opposed, arguing that the credit agreements precluded litigation and class actions.
The consumers argued that the arbitration agreement was void because the CROA contains specific language that grants any consumer the "right to sue in court" for CROA violations. 15 U.S.C. § 1679c (consumers "have a right to sue a credit repair organization that violates the [CROA]"). The consumers also alleged that all consumer rights under the CROA were not waivable. 15 U.S.C. § 1679f(a) ("waiver by any consumer of any protection provided by or any right of the consumer under this subchapter (1) shall be treated as void; and (2) may not be enforced" in any court).
The Court initially acknowledged the long line of cases allowing waiver of statutorily-conferred rights by consumers in varying contexts. See, e.g., Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 90 (2000) (TILA claims); Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 29 (1991) (ADEA claims); Rodriguez de Quijas v. Shearson-Am. Express, Inc., 490 U.S. 481-83 (1989) (Exchange Act and Securities Act claims); McMahon v. Shearson-Am. Express, Inc., 482 U.S. 220, 228 (1987) (same); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 624, 628 (1985) (Sherman Act anti-trust claims).
The Court found the text of the CROA distinguishable from the language in the long list of statutes the united States Supreme Court found preserved the parties’ right to waive access to a judicial forum. The Court distinguished the interpretation of the Sherman Act in Mitsubishi Motors by noting an "international" element of the antitrust claims and the absence of the CROA’s express anti-waiver language in the Sherman Act.
The Court distinguished the Securities and Exchange Act claims in McMahon and Rodriguez de Quijas by noting that these statutes expressly applied the anti-waiver provisions to non-compliance with the Act, not forum selection or class action election. The Court chose to ignore similar language in the titling of the CROA, opining that this title could not "limit the plain meaning of the [CROA’s] text."
The Court distinguished the ADEA claims in Gilmer by observing that the ADEA does not expressly provide the right to sue to aggrieved parties, but does take a "flexible approach to the resolution of claims" that contemplates alternate forums. The Court also distinguished the TILA claims in Green Tree by observing that the resistance to arbitration in Green Tree was based on prohibitive costs, not any particular procedural "right to sue."
According to the Court, none of the Supreme Court’s clear opinions upholding waivability of similar statutory claims supported applying the same presumption in favor of arbitration to CROA claims.
The Court noted disagreement among other federal courts as to whether the right to sue for violations of CROA claims was waivable, but concluded that the anti-waiver provision in the CROA evinced clear congressional intent to preclude resolution in an alternate forum.
Note that the Greenwood court’s opinion represents a strong departure from the majority rule that CROA claims are arbitrable pursuant to a contractual waiver such as the one signed by the Greenwood consumers. Compare, e.g., Picard v. Credit Solutions, Inc., No. 08-11104, --- F.3d ----, 2009 WL 902145 (11th Cir. Apr. 6, 2009) (CROA does not invalidate agreements to arbitrate all claims against credit repair organization); Gay v. Creditinform, 511 F.3d 369, 383 (3d Cir. 2007) (CROA anti-waiver provision does not apply to forum selection or class action availability); Rex v. CSA-Credit Solutions of Am., Inc., 507 F.Supp.2d 788, 798 (W.D. Mich. 2007) (§ 1679c disclosures do not afford any "rights or protections" that would be subject to anti-waiver provision); Vegter v. Forecast Financial Corp., No. 1:07-CV-279, 2007 WL 4178947 (W.D. Mich. Nov. 20, 2007) (CROA anti-waiver provision does not preclude arbitrability); Schreiner v. Credit Advisors, Inc., No. 8:07-CV-78, 2007 WL 2904098 (D. Neb. Oct. 2, 2007) (no clear congressional intent to preclude CROA arbitrability), with Reynolds v. Credit Solutions, Inc., 541 F.Supp.2d 1248, 1258 (N.D. Ala. 2008) (anti-waiver language is clear congressional expression of intent to preclude judicial forum waiver); Alexander v. U.S. Credit Mgmt., Inc., 384 F.Supp.2d 1003, 1011 (N.D. Tex. 2005) (same).